“The bank notes recent media speculation and confirms that it is in advanced discussions with a group of existing investors with a view to a prospective equity capital raise and liability management exercise,” the lender said.

In March the bank, which has four million customers, said its ability to meet longer-term UK bank regulatory capital requirements has been hampered by low interest rates and higher than anticipated transformation and “conduct remediation” costs.

Co-op Bank almost collapsed in 2013 after the discovery of a £1.5 billion black hole in its finances and it was forced into a painful debt-for-equity swap. As a result, the loss-making lender is now majority controlled by US hedge funds.

The Co-operative Group owns just 20% of the bank.

The lender added: “The bank continues to fully discuss both the sale process and the capital raise options with the Prudential Regulation Authority (PRA), which has welcomed the sale and capital raise process.”